EXHIBIT 10.4
ESCROW AGREEMENT
This Escrow Agreement dated this 19th day
of October, 2009 (the “Escrow Agreement”), is entered
into by and among Alfacell Corporation, a Delaware corporation (the
“Company”), James McCash (the “Escrow
Representative”), as representative of the Escrow Parties (as
defined herein) (the Escrow Representative and the Company
together, the “Parties,” and individually, a
“Party”), and Wells Fargo Bank, National Association,
as escrow agent (the “Escrow Agent”).
RECITALS
WHEREAS, the Company, the Mary M. McCash
Trust Declaration Declared October 20, 2008, the Michael J. McCash
Living Trust, Colleen A. Lowe, Corinne M. Poquette and David J.
McCash (collectively, the “McCash Purchasers”) and
Charles Muniz (together with the McCash Purchasers, the
“Escrow Parties”) are parties to that certain
Securities Purchase Agreement dated as of the date hereof by and
among the Company and the investors identified therein (the
“Purchase Agreement”);
WHEREAS, the Escrow Representative has
been appointed pursuant to the Purchase Agreement as representative
of the Escrow Parties pursuant to the Purchase Agreement to act on
their behalf herein;
WHEREAS, the Purchase Agreement provides
that an escrow account shall be established to ensure that the
Escrow Property (as defined herein) is used solely to satisfy
obligations of the Company owed to clinical research organizations,
hospitals, doctors and other vendors and service providers
associated with the clinical trials which the Company intends to
conduct for its Onconase product subject to the limitations, and in
the manner provided, in this Escrow Agreement; and
WHEREAS, simultaneously with the closing
of the transactions contemplated by the Purchase Agreement and
pursuant to the terms of the Purchase Agreement, the Escrow
Representative shall place One Million Six Hundred Thousand Dollars
($1,600,000) (the “Escrow Property”) in escrow, and the
Escrow Agent agrees to hold and distribute such funds in accordance
with the terms of this Escrow Agreement.
NOW THEREFORE, in consideration of the
promises and agreements of the Parties and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties and the Escrow Agent agree as
follows:
ARTICLE 1
ESCROW DEPOSIT
Section 1.1.
Receipt of Escrow Property
. Upon execution hereof,
the Escrow Representative shall deliver to the Escrow Agent the
Escrow Property in immediately available funds for the benefit of
the Company in accordance with the terms herein.
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Section 1.2.
Investments .
(a)
The Escrow Agent is hereby authorized and
directed to deposit, transfer, hold and invest the Escrow Property
and any investment income thereon as set forth in Exhibit A hereto,
or as set forth in any subsequent written instruction signed by the
Company. Any investment earnings and income on the Escrow Property
shall become part of the Escrow Property, and shall be disbursed in
accordance with Section 1.3 or Section 1.5 of this Escrow
Agreement.
(b)
The Escrow Agent is hereby authorized and
directed to sell or redeem any such investments as it deems
necessary to make any payments or distributions required under this
Escrow Agreement. The Escrow Agent shall have no responsibility or
liability for any loss which may result from any investment or sale
of investment made pursuant to this Escrow Agreement. The
Escrow Agent is hereby authorized, in making or disposing of any
investment permitted by this Escrow Agreement, to deal with itself
(in its individual capacity) or with any one or more of its
affiliates, whether it or any such affiliate is acting as agent of
the Escrow Agent or for any third person or dealing as principal
for its own account. The Parties acknowledge that the Escrow Agent
is not providing investment supervision, recommendations, or
advice.
Section 1.3.
Disbursements .
(a)
The Parties hereby agree that the Escrow
Property shall be disbursed only to satisfy obligations of the
Company owed to clinical research organizations, hospitals,
doctors, vendors and other service providers associated with the
clinical trials which the Company intends to conduct for its
Onconase product (the “Disbursement Conditions”);
provided further that the Company shall, upon written request
received from the Escrow Representative, provide reasonable
documentation evidencing satisfaction of the Disbursement Condition
to the Escrow Representative.
(b)
Upon receipt of joint written
instructions certifying that the Disbursement Conditions have been
met, substantially in the form of Exhibit B hereto executed by both
the Company and the Escrow Representative (the “Disbursement
Instructions”) the Escrow Agent agrees to disburse the amount
or amounts indicated in the Disbursement Instructions, to the
account or accounts so indicated therein. Such remittance shall be
made by wire transfer.
(c)
Within five (5) business days following
receipt of reasonable documentation evidencing satisfaction of the
Disbursement Conditions as set forth in Section 1.3(a) above, the
Escrow Representative shall execute and deliver the Disbursement
Instructions to the Escrow Agent; provided that the Escrow
Representative shall only withhold executing and delivering such
Disbursement Instructions on a good faith determination by the
Escrow Representative that the amount or amounts indicated in the
Disbursement Instructions are not reasonably related to the
clinical trials which the Company intends to conduct for its
Onconase product.
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Section 1.4.
Income Tax Allocation and
Reporting .
(a)
The Parties agree that, for tax reporting
purposes, all interest and other income from investment of the
Escrow Property shall, as of the end of each calendar year and to
the extent required by the Internal Revenue Service, be reported as
having been earned by the Company, whether or not such income was
disbursed during such calendar year.
(b)
Prior to closing, the Parties shall
provide the Escrow Agent with certified tax identification numbers
by furnishing appropriate forms W-9 or W-8 and such other forms and
documents that the Escrow Agent may request. The Parties understand
that if such tax reporting documentation is not provided and
certified to the Escrow Agent, the Escrow Agent may be required by
the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, to withhold a portion of any interest or
other income earned on the investment of the Escrow
Property.
(c)
To the extent that the Escrow Agent
becomes liable for the payment of any taxes in respect of income
derived from the investment of the Escrow Property, the Escrow
Agent shall satisfy such liability to the extent possible from the
Escrow Property. The Parties, jointly and severally, shall
indemnify, defend and hold the Escrow Agent harmless from and
against any tax, late payment, interest, penalty or other cost or
expense that may be assessed against the Escrow Agent on or with
respect to the Escrow Property and the investment thereof unless
such tax, late payment, interest, penalty or other expense was
directly c